Media Matters goes beyond simply reporting on current trends and hot topics to get to the heart of media, advertising and marketing issues with insightful analyses and critiques that help create a perspective on industry buzz throughout the year. It's a must-read supplement to our research annuals.
To begin with, let’s be perfectly clear: by “television,” we mean all forms of TV content and all the ways people access it, not just so-called linear or pay TV.
Over the past decade or so, there has been a major shift in our use of program sources and viewing time from traditional linear TV sources to digital ones. While the latter has always featured videos of various types and lengths, the advent of connected TV and SVOD services like Netflix, caused many to dramatically alter their viewing habits. This has allowed so-inclined viewers—mainly younger- to middle-aged and upscale adults and their children—to view programming on their own schedules and at the frequency they choose, including binge watching favorite shows.
This has resulted in linear TV audiences shrinking—and aging—rather dramatically, forcing the networks to change their long-standing business plans. Traditionally, they have depended on ad revenues to cover operating and program costs, while their profits were mostly generated by retransmission fees paid by cable and satellite distributors for the right to include network stations in their lineups. With cord cutting increasingly threatening pay TV’s bottom line, the broadcast networks have had to look for other ways to bolster their incomes.
At first, the networks tried to squeeze more dollar value out of their linear TV audience base, even though it was shrinking. This took many forms. One was to increase commercial loads, especially in high CPM primetime. Another method was to try to entice marketers with refined targeting options based on large sample set-top-box audience profiling, dubbed “advanced TV.” Then NBCU came up with a novel and quite clever idea to offer advertisers positions in “premium” ad breaks with only two 30-second commercials. These were sure to deliver higher commercial exposure levels and ad impact but, like their advanced TV deals, at much higher CPMs. Finally, in the 2021-22 upfront, the broadcast TV networks simply demanded—and got—CPM increases of about 20%.
The results have been mixed so far. Increased commercial loads undoubtedly generate more GRPs to sell, so that’s a plus for network incomes, although certainly not for viewers. And the recent hike in CPM demands, if maintained for a number of seasons, will also help, that is, if advertisers are willing to go along with it. However, the advanced TV and premium break approaches have not produced results as strong as the networks may have hoped, due in part to poor handling on the part of the sellers.
Not surprisingly, the TV networks—along with their cable channels and O&O/affiliate cohorts—have shifted their focus to the streaming arena. The goal is simple: create a new revenue stream based on SVOD subscriptions and/or ad sales from associated AVOD services. In this plan, the networks’ Hollywood partners would supply new movies to launch on the services, and some original TV productions would be funded, both as a lure to hook SVOD subscribers/AVOD viewers. But the bulk of the networks’ streaming libraries would consist of both new and old linear TV fare, which has already been paid for.
The shift to streaming is a fairly recent development, so the TV establishment won’t be able to count on profitability for its SVOD/AVOD ventures for several years, but the long-term prognosis is good. That is, if mistakes like overinvesting in original content are avoided, and strategies are developed for dealing with competition from other streaming services, as well as CTV and digital video time sellers.
Here, the streaming broadcast sellers should take CTV’s experience as a cautionary tale. With CTV, advertisers are offered far superior targeting and frequency capping capabilities than are possible using linear TV, although at higher CPMs. It’s a good option, but ad sales have been sluggish among many linear TV branding advertisers. Why? Because CTV time sellers continue to operate using digital rules, which are plagued by numerous problems, including the use of dubious audience metrics; programmatic buying systems that ignore program quality and reach and simply buy low-CPM audience tonnage; and by highly repetitive ad scheduling practices. Compounding these problems is the fact that CTV is typically handled by digital experts at an agency, not those who buy linear TV time. At most agencies, the digital people are unfamiliar with linear TV, including how it’s planned and bought, how ads are placed and monitored, as well as post-buy negotiations. As a result, CTV is not a part of the annual upfront TV sales, which gobbles up 65-70% of national TV ad dollars. Instead, it’s an afterthought, perceived more as an add-on than an integral part of the media plan.
For the broadcast streaming service sellers, the lesson should be clear. Don’t try to convert TV’s branding advertisers and the planners and buyers who handle their TV time buys to the digital, direct-response mode. Instead, integrate with the total TV planning/buying process, using the same metrics and speaking the same language they’re familiar with. Then tout the unique targeting and frequency capping capabilities you can offer.
This brings us to another issue. For most branding advertisers, their CMOs are of the opinion that brand positioning strategies and the creative execution of the commercials are their highest priorities. In contrast, media planning and buying is a boring, numbers-crunching exercise. It’s necessary but not interesting. Few CMOs attend media meetings and, for the most part, they’re oblivious to new options that might help them target their TV ad exposures more effectively. They hear the buzz about streaming, addressable TV and so on, but just can’t be bothered to devote the time to really research how it might help their brands. This is why the annual upfront, corporate umbrella buys persist; their focus is on securing audience tonnage at the lowest possible cost. But there really should be so much more to it.
So, what’s being done about integrating the various forms of television and helping those involved in TV advertising to learn more about the medium and what it has to offer? Unfortunately, the answer is very little. A few of the newer and more agile agencies are training their digital and linear TV people to understand both approaches. But most agencies are perfectly content as they are: media planners know relatively little about marketing or creative; national TV time buyers know little about digital TV and streaming; and the creatives are totally out of the loop about media. This continues because agency clients--especially the CMOs—want to pay their agencies the lowest possible fees for their work, and integration would require more staff, time spent, and so on.
The sellers are equally oblivious to the way TV media mix decisions are made, which in many cases are arbitrary, as well as who makes the decisions. NBCU’s opening gambit in its effort to launch its premium break concept illustrates this point. Rather than pre-selling the idea to the CMOs of many of the larger branding advertisers so they could consider it as their brands began to prepare for the upfront, NBCU went to the people they know—the buyers—to make the sale. Since the buyers are judged mainly on their ability to pay less per viewer, they naturally rejected the higher CPMs of the premium breaks. Hopefully it was a lesson learned.
Ultimately, of all the parties that are involved with TV in its myriad forms, it may be up to media directors (and their planners) to take the lead if anything is going to change. Yes, it’s true that client CMOs—and hence agency brass—see no reason why a media director should be well versed in marketing dynamics or in the creative process, but that doesn’t mean that media directors are forbidden to educate themselves so that they can think about media’s role more realistically, and perhaps make proposals that might actually improve results. This, however, requires taking a risk and stepping outside of the confines of the media department, which many will find terrifying. But think about it: media directors are probably better placed than either the CMOs or the agency creatives to see the big picture because they already know most of the individual components (ratings, demos, CPMs, reach/frequency patterns, etc.). Media directors also understand the concept of the trade-off; in this case, that a more expensive media plan may deliver results that make it a better approach than a more economical one. Hopefully some will take up this challenge. This edition of TV Dimensions—its information, observations and evaluations—is designed to help in this endeavor.